Knife edge vote: Besix to sell out entirely from Watpac if takeover fails

Knife edge vote: Besix to sell out entirely from Watpac if takeover fails

Source: The Australian Financial Review.
By: Larry Schlesinger.

Watpac suitor Besix has warned it will sell out entirely from the ASX-listed contractor and mining services company if shareholders don’t vote in favour of its two-thirds takeover.

The Belgian construction giants proposal to lift its stake in Watpac to 64 per cent from a current 28 per cent by acquiring half the shares it does not already own at 92¢ a share is reportedly on a knife edge with activist investor Sandon Capital and proxy advisor ISS both recommending shareholders vote no.

Commonwealth Bank, Watpac’s second-largest shareholder, has increased its stake since the proposal was made in February, suggesting it supports the Besix offer, while another proxy firm, CGI Glass Lewis has recommended the bid.

Besix officially declared its offer best and final on Friday. Proxy votes must be submitted by June 5 with the scheme of arrangement vote scheduled for June 7.

Speaking to The Australian Financial Review on Friday, Besix CEO Rik Vandenberghe said it would “evaluate its position after the vote” and “seriously” consider selling its existing stake.

“Watpac is not performing as it should. Something has to be done and we can do it. We have the capability,” Mr Vandenberghe said. “There is no hidden agenda, we just want to do a good job for all shareholders.”

He added that if this vote was happening in Belgium, it would be strongly supported because Besix has such a strong reputation in Europe. Among its completed projects is Dubai’s Burj Khalifa, the world’s tallest building.

Proxy advisor ISS has warned that Besix owning two thirds of Watpac meant it could “exercise control over the company and [be able] to pass ordinary resolutions without regarding for the minority interests”.

It also suggested that Watpac directors, who have unanimously backed the deal, would benefit financially through the early vesting of long-term incentive awards.

Sandon Capital, which represents funds holding about 3 per cent of the Watpac register, argues the Besix offer is opportunistic, given the current state of the loss-making company and that undervalues its true worth.

Shares in Watpac closed down slightly at 79.5 cents on Friday – well below the Besix offer price with only a few days to go until the vote.

Watpac has forecast a full-year underlying net loss before tax for FY18 of between $3 million and $5 million after missing out on two major mining project tenders. The company is exploring a sale of its mining business.

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